German finance minister drops debt repayment goal - interview

BERLIN (Reuters) - Germany's finance minister appears to have dropped his insistence on starting to pay back the country's debt from 2015, focusing instead on not borrowing more and not raising taxes.

Wolfgang Schaeuble's comments to Focus magazine would give Chancellor Angela Merkel's party more leeway to finance expensive projects discussed in talks to form a government with the Social Democrats, such as investing in roads and railways.

In an advance copy of the interview seen on Sunday, Schaeuble said the aim was to issue no new debt from 2015 and to cut the level of debt to gross domestic product to below 60 percent from the current roughly 80 percent within 10 years.

Schaeuble, who has signalled he would like to stay as finance minister in the new administration, made no mention of plans to pay back Germany's just over 2 trillion euro debt, which he had still referred to as late as June.

"We want to issue ... no new debt at all from 2015 and to keep that from then on," Schaeuble told Focus magazine. "The debt ratio decreases automatically if we issue no new debt and if the economy continues to grow."

"Our medium-term financial planning up to 2017 gives us some leeway but we can only count on that if we continue on our growth-friendly path," Schaeuble said.

"We believe tax increases are counter-productive. That's the basis on which we negotiate," Schaeuble said.

Merkel's conservatives easily won the election on September 22 but fell just short of being able to govern alone. They have entered coalition talks with the Social Democrats (SPD), who had campaigned on the need to increase taxes and boost investment.

Welt am Sonntag newspaper reported on Sunday a new cabinet could be larger than the previous one, which had 16 members.

According to the paper, the SPD was demanding seven to eight ministries, while Der Spiegel magazine reported the party was aiming for seven ministries but was considering dropping its claim to the Finance Ministry.

SPD leader Sigmar Gabriel, however, denied the reports, saying the assignment of ministries would be decided last. SPD deputy parliamentary group leader Hubertus Heil told Reuters such reports were speculation.